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Fry’s Electronics VP Arrested for Embezzlement

23 Dec, 2008 By: Erik Gruenwedel

A VP of merchandising and operations with Fry’s Electronics was arrested last week by federal authorities on charges he allegedly embezzled more than $65 million since 2005 from the San Jose, Calif.-based CE chain in a brazen scheme involving secret kickbacks from vendors.

In the complaint filed Dec. 18 by the Internal Revenue Service with the U.S. District Court in San Jose, Ausaf Umar Siddiqui allegedly devised secret deals with five vendors that involved purchasing excessive amounts of merchandise above market rates in return for kickbacks ranging from 15% to 31% of the total order.

Typically, CE vendors pay third-party sales representatives commissions from 3% to 8% of the total business secured with a retailer such as Fry’s. Siddiqui convinced Fry’s executives to bypass outside sales representatives and allow him to deal directly with vendors to purchase product at a lower price, according to the complaint.

The VP awarded sales contracts to vendors involved in the kickback scheme. He received the kickbacks via funds channeled through a fraudulent shell company.

Privately held Fry’s was not named in the complaint. It operates 34 stores in nine states with 14,000 employees and generated about $2.3 billion in revenue in 2007.

A spokesperson said the retailer was cooperating with the U.S Treasury Department to expose any others involved in the scheme.

"Fry's demanded prosecution to the fullest extent of the law," she said.

Vendors cited in the complaint include Phoebe Micro Inc., Lead Data International Inc., U.S. Media Technologies Inc., and Elitegroup Computer Systems Inc.

Siddiqui started in computer sales with Fry’s in 1988 and rose through the company, becoming VP of merchandising in 2003. He supervised 120 employees and earned a base salary of $225,000.

If convicted, Siddiqui faces 10 years in prison and a $250,000 fine.

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